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3 Healthcare Mutual Funds to Buy Amid Rate Cut Uncertainty
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The minutes from the Federal Reserve’s Apr 30-May 1 meeting emphasized worries about rising prices and the possibility of interest rate increases. Despite optimism that inflation will reach the 2% goal in the future, Fed officials understand that it might take longer for prices to stabilize.
Recent data from the U.S. Labor Department showed that the Consumer Price Index (CPI) rose 3.4% year over year in April and core CPI, which excludes food and energy prices, rose 3.6%, both in line with estimates. The year-over-year core CPI growth rate was the lowest since April 2021, indicating continued inflationary pressure. Even though the benchmark interest rate remains between 5.25-5.50%, the Fed is open to raising rates if inflation persists.
Rate hikes can greatly affect the economy and stock market. When the Federal Reserve decides to raise interest rates, it means that borrowing money becomes more expensive for both individuals and businesses. This can result in decreased spending and investment, ultimately leading to a slowdown in economic growth. Moreover, higher interest rates typically have an impact on profits since companies may have to deal with higher costs related to servicing their debts.
Given this economic landscape, investing in the healthcare sector appears attractive due to its stability and resilience. The consistent demand for healthcare services and products makes this sector less sensitive to fluctuations, as people will always require care and treatment regardless of financial conditions. Healthcare companies typically have a lower beta value, indicating volatility compared to the broader market trends. This reliability and essential nature of healthcare services make such companies a safe option for investments during times of economic uncertainty.
Nonetheless, investing in healthcare mutual funds seems to be judicious as of now. Also, mutual funds, in general, diversify portfolios without several commission charges that are mainly associated with stock purchases and trim transaction costs (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have, thus, chosen three healthcare mutual funds that investors should buy now for the long term. These funds possess a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and expense ratios considerably lower than the category average. So, these funds have given a comparatively strong performance along with lower fees.
Fidelity Select Pharmaceuticals Portfolio (FPHAX - Free Report) primarily invests in stocks of companies principally engaged in the research, development, manufacture, sale, or distribution of pharmaceuticals and drugs of all types. FPHAX advisors use fundamental analysis of factors like each issuer's financial condition and industry position, as well as market and economic conditions, to arrive at their investment decision.
Karim Suwwan de Felipe has been the lead manager of FPHAX since Jun 30, 2017. Most of the fund’s holdings were in Eli Lilly and Co (24.2%), Novo Nordisk A/S (14.4%) and AstraZeneca PLC (8.2%) as of Feb 29, 2024.
FPHAX’s 3-year and 5-year annualized returns are 11.6% and 14.4%, respectively. Its net expense ratio is 0.73%. FPHAX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Vanguard Health Care (VGHCX - Free Report) primarily invests in stocks of companies principally engaged in the development, production, or distribution of products and services in the healthcare industry. VGHCX also invests a significant portion of its assets in foreign stocks.
Jean M. Hynes has been the lead manager of VGHCX since May 28, 2008. Most of the fund’s holdings were in Eli Lilly and Co (7.6%), UnitedHealth Group (6.9%) and AstraZeneca PLC (5.2%) as of Jan 1, 2024.
VGHCX’s 3-year and 5-year annualized returns are 5.6% and 10.1%, respectively. Its net expense ratio is 0.35%. VGHCX has a Zacks Mutual Fund Rank #1.
Janus Henderson Global Life Sciences Fund (JNGLX - Free Report) invests its net assets in securities issued by firms that the advisors believe have a life science emphasis. JNGLX has created a fundamental policy mandating a minimum investment of its total assets in securities issued by firms categorized under the "life sciences" sector.
Andy Acker has been the lead manager of JNGLX since Apr 30, 2007. Most of the fund’s holdings were in UnitedHealth Group (6.5%), Eli Lilly and Co (5.1%) and Novo Nordisk A/S (4.2%) as of Dec 31, 2022.
JNGLX’s 3-year and 5-year annualized returns are 4.9% and 11.2%, respectively. Its net expense ratio is 0.80%. JNGLX has a Zacks Mutual Fund Rank #2.
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3 Healthcare Mutual Funds to Buy Amid Rate Cut Uncertainty
The minutes from the Federal Reserve’s Apr 30-May 1 meeting emphasized worries about rising prices and the possibility of interest rate increases. Despite optimism that inflation will reach the 2% goal in the future, Fed officials understand that it might take longer for prices to stabilize.
Recent data from the U.S. Labor Department showed that the Consumer Price Index (CPI) rose 3.4% year over year in April and core CPI, which excludes food and energy prices, rose 3.6%, both in line with estimates. The year-over-year core CPI growth rate was the lowest since April 2021, indicating continued inflationary pressure. Even though the benchmark interest rate remains between 5.25-5.50%, the Fed is open to raising rates if inflation persists.
Rate hikes can greatly affect the economy and stock market. When the Federal Reserve decides to raise interest rates, it means that borrowing money becomes more expensive for both individuals and businesses. This can result in decreased spending and investment, ultimately leading to a slowdown in economic growth. Moreover, higher interest rates typically have an impact on profits since companies may have to deal with higher costs related to servicing their debts.
Given this economic landscape, investing in the healthcare sector appears attractive due to its stability and resilience. The consistent demand for healthcare services and products makes this sector less sensitive to fluctuations, as people will always require care and treatment regardless of financial conditions. Healthcare companies typically have a lower beta value, indicating volatility compared to the broader market trends. This reliability and essential nature of healthcare services make such companies a safe option for investments during times of economic uncertainty.
Nonetheless, investing in healthcare mutual funds seems to be judicious as of now. Also, mutual funds, in general, diversify portfolios without several commission charges that are mainly associated with stock purchases and trim transaction costs (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have, thus, chosen three healthcare mutual funds that investors should buy now for the long term. These funds possess a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and expense ratios considerably lower than the category average. So, these funds have given a comparatively strong performance along with lower fees.
Fidelity Select Pharmaceuticals Portfolio (FPHAX - Free Report) primarily invests in stocks of companies principally engaged in the research, development, manufacture, sale, or distribution of pharmaceuticals and drugs of all types. FPHAX advisors use fundamental analysis of factors like each issuer's financial condition and industry position, as well as market and economic conditions, to arrive at their investment decision.
Karim Suwwan de Felipe has been the lead manager of FPHAX since Jun 30, 2017. Most of the fund’s holdings were in Eli Lilly and Co (24.2%), Novo Nordisk A/S (14.4%) and AstraZeneca PLC (8.2%) as of Feb 29, 2024.
FPHAX’s 3-year and 5-year annualized returns are 11.6% and 14.4%, respectively. Its net expense ratio is 0.73%. FPHAX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Vanguard Health Care (VGHCX - Free Report) primarily invests in stocks of companies principally engaged in the development, production, or distribution of products and services in the healthcare industry. VGHCX also invests a significant portion of its assets in foreign stocks.
Jean M. Hynes has been the lead manager of VGHCX since May 28, 2008. Most of the fund’s holdings were in Eli Lilly and Co (7.6%), UnitedHealth Group (6.9%) and AstraZeneca PLC (5.2%) as of Jan 1, 2024.
VGHCX’s 3-year and 5-year annualized returns are 5.6% and 10.1%, respectively. Its net expense ratio is 0.35%. VGHCX has a Zacks Mutual Fund Rank #1.
Janus Henderson Global Life Sciences Fund (JNGLX - Free Report) invests its net assets in securities issued by firms that the advisors believe have a life science emphasis. JNGLX has created a fundamental policy mandating a minimum investment of its total assets in securities issued by firms categorized under the "life sciences" sector.
Andy Acker has been the lead manager of JNGLX since Apr 30, 2007. Most of the fund’s holdings were in UnitedHealth Group (6.5%), Eli Lilly and Co (5.1%) and Novo Nordisk A/S (4.2%) as of Dec 31, 2022.
JNGLX’s 3-year and 5-year annualized returns are 4.9% and 11.2%, respectively. Its net expense ratio is 0.80%. JNGLX has a Zacks Mutual Fund Rank #2.
Want key mutual fund info delivered straight to your inbOX?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>